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Types of Bonuses
There are several types of bonus programs. Some plans simply give employees a certain share of the company profits (current profit sharing), regardless of the performance of individuals or teams or perhaps a bonus to the entire company based on the company's performance (organization-wide bonus).
There are several types of bonus programs. Some plans simply give employees a certain share of the company profits (current profit sharing), regardless of the performance of individuals or teams or perhaps a bonus to the entire company based on the company's performance (organization-wide bonus). Other programs give incentives to individuals (individual incentive) or teams (team incentive/small group incentive) to perform at or above certain thresholds. In some companies, manufacturing teams are able to share in the gains from improvements in production and quality (gain sharing). And a variety of cash and noncash awards are possible for certain types of achievements in some companies (spot bonus awards, noncash rewards). You can also earn bonuses for being hired or getting your friend a job at your company.
Current profit sharing
The purpose of profit sharing bonuses is to encourage employees to understand how their work affects the company's performance and to improve the company's profitability. Learn how your company makes money and how your position can help it make more. The annual report and other statements will give you an idea of how the company is performing. It will also make you look good to your manager if you show an interest in the company's performance.
Gain sharing programs pay out bonuses for statistical improvements in production and quality on a quarterly or sometimes monthly basis, providing a sense of excitement for participants. These programs are often very successful, transforming the manufacturing plant into a center of employee commitment.
Spot bonus award
You know your company has a good noncash bonus program if these awards are coveted, and if people who receive them display them proudly at their desks or in their homes. Moreover, this type of award may help you get a promotion or a new job, so include it on your resume.
Given to new employees who have just joined the company, this award serves two purposes: to establish goodwill and to buy out any compensation "left on the table" from a previous employer.
The second purpose is important to remember. Before joining a new company, be sure to account for every kind of compensation program in which you participate. If you are expecting a bonus in a few months, ask your new employer to buy you out of it. If you have any stock options, particularly options that are in the money, ask the employer to buy them out (either in cash or new stock options).
Don't forget to include profit-sharing bonuses or defined contributions (for example, a 401(k) match or an Employee Stock Options Program (ESOP)) made to your retirement account. Remember, a sign-on bonus, at a minimum, is to keep you whole as you trade one set of compensation programs for a new one.
Medium to large signing bonuses may be paid over a period up to a year to protect the company's interests.
Mission bonus (also known as a task bonus or a milestone
Mission bonuses are in addition to any other compensation program in which you participate and can be significant (one month's salary is not uncommon, and certainly no less than one week). Again, this award is for the kind of achievement that deserves mention in your resume.
Referral bonuses are typically hundreds to thousands of dollars and normally depend on the level of the new hire. Some firms pay as much as $10,000 to $20,000 if you introduce a new senior person to the firm. So if your former boss is a good fit for an opening, it might be worthwhile to let your new company know.
If you are accepting a new job or sales territory, ask for the previous salesperson's sales performance to determine how likely you are to achieve your quota and sales target for you to meet your personal income goals. Also, construct a business plan based on your understanding of your sales territory. This is key to understanding how easy or difficult hitting your goals will be.
- Dwight Ueda, Salary.com Contributor
Copyright 2000-2004 © Salary.com, Inc.
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